In Italy's middle ground economic crisis runs deep

SULMONA // As the sun warms Renaissance palazzos around a cobbled square where locals and tourists sip cappuccino, the ageless face of middle Italy betrays no hint of the crisis in Rome.

Yet stop and talk to those going about their business in the piazza of Sulmona, a town of 25,000 near Italy's geographical centre, and the anger running through the nation's middling folk boils to the surface, as do fears that a decade of economic decline is about to be made even worse.

"Sulmona is black. No jobs, no nothing," complained Franca Minichini, 51, as she hurried past a bronze statue of the city's favourite son, the poet Ovid.

Walled in above a fertile valley in the Apennine mountains, on a historic frontier between Italy's poor south and industrial north, Sulmonese have survived centuries of invasions and crises. Many today stress it is not dramas on financial markets that worry them, but a bleak outlook for jobs and wages.

At an annual average rate of just 0.3 per cent over a decade, Italy has grown faster than only Zimbabwe, Eritrea and Haiti. Now, measures unveiled on Friday to meet EU demands for Italy to cut its debt, though its current deficit is already relatively low, are likely to stifle demand further.

"This isn't new for us. This area has been depressed for a long time," said Fabrizio as he stood in his dimly lit newspaper kiosk surrounded by headlines screaming "Crisis", "Stockmarket Collapses" and "Chaos in Government".

"But people are afraid now. They expect measures to hit the middle classes especially."

Consumer spending is down 4 per cent to 5 per cent on last year in the Abruzzo region, said Franco Ruggieri, the local vice president of the national small business association Confesercenti.

"It's still falling," he said, not helped by the lingering effects of the 2009 earthquake which devastated nearby L'Aquila. "People aren't spending and more cuts won't help. But the real worry now is the uncertainty. Two months ago they said everything was fine and now there's one emergency measure after another," he said. "We don't know who to believe."

Ms Minichini felt her own job in local government was safe. But she worried for her children in a city where the past decade has left the industrial zone beyond the walls a virtual ghost town. Real purchasing power has fallen 4 per cent in 10 years.

How Italians may respond to more pain is unclear. Anger, but also deep resignation, is a common emotion directed at not just Prime Minister Silvio Berlusconi's right-wing government but at an entire political elite seen as corrupt and unaccountable. "They should all go," said Ms Minichini. "If there are to be cuts, they should start by cutting themselves."

Like others, she associated the decline of local industry with the introduction of the single European currency a decade ago: "The euro ruined everything," she said.

But like most Italians, the idea of the euro zone's third biggest economy opting out of the project does not seem practical, even if a return to the often-devalued lira might offer a short-term fix for the debt burden and sluggish exports.

"Before the euro, Sulmona was doing really well, but now our prices are too high. We've lost our factories," said Alfonso De Dominicis, 58, a former factory and construction worker who now drives a taxi.

But, he said, it was too late to opt out. The best way forward for politicians of right and left, who seemed uniformly to him to be "thieves", would be to follow the example of economic growth set by Germany, where he himself spent many years as a young "guest worker" in the 1970s and 80s. "We should learn from the German example. We have the workers, the skills," Mr De Dominicis said. "It's the government that's to blame. In Germany, they have a government that does what's good for the country. Here, ours just think 'I'm doing all right' and they don't give a damn for anyone else."

The idea of greater EU intervention in national affairs is anathema in much of Europe, but in Italy, where the economy minister, Giulio Tremonti, suggested on Saturday more integration of public finances across the bloc, added external leverage over a discredited ruling class has attractions for some.

While Sulmona's young people start to follow forebears in heading north or abroad for work, and some of those left behind mutter darkly about "revolution", there is daily talk of efforts to save the city from the latest of its many crises.

This month a plant producing car components for Fiat announced hirings for a new assembly line. Tourism is contributing more to the town's economy. And local gourmet foodstuffs are also promoted abroad.

Emanuele Giammarco, 32, is the 10th generation of his family to manage the Rapone company producing a luxury artisan version of "confetti", the sugared almonds ubiquitous at Italian weddings and for which Sulmona is renowned. For him, the answer to the crisis is a focus on luxury quality and new markets. Mr Giammarco said: "High finance is a big bubble. But we have to adapt and we must go forward."